Aidid said: "We will surround them but we will leave open [an opportunity] for dialogue and negotiations for them to disarm."

So far, the offer of peace talks has fallen on deaf ears, with the Islamic courts leaders refusing to discuss surrender.

Sheikh Sharif Sheikh Ahmed, the group's leader, told residents in Kismayo on Saturday: "I want to tell you that the Islamic courts are still alive and ready to fight against the enemy of Allah.

"We left Mogadishu in order to prevent bloodshed in the capital, but that does not mean we lost the holy war against our enemy."

Ahmed told Al Jazeera on Sunday: "We decided to fight the enemy in every area."

On Sunday, as Somali transitional government and Ethiopian forces, riding in 16 Ethiopian tanks and accompanied by armoured vehicles and artillery, swept southwards, they were met by as many as 2,000 civilians fleeing the expected fighting.

"The Islamic militia told us they are committed to defend the town to the death, so we have no other option but to flee," Ilse Ali Ilweyn, a father of six who lives in Jilib, said.

Thousands flee

Osman Mohamed, an aid worker in the area, said: "Two thirds of the population in Jilib have fled the town ... nearly 4,700 have fled."

After retreating from Mogadishu on Thursday, the Islamic courts had told its fighters to rally around Jilib and Kismayo.

Re-building war-ravaged Somalia will be a challenge for any government [AFP]

The militia used bulldozers to dig deep trenches outside Jilib, where analysts believe they had about 3,000 fighters.

With the Islamic courts moving backwards, Kenya has reinforced its northern border and US forces are also said to be in the region.

In another development, senior members of the transitional government began meeting local and tribal leaders in and around Mogadishu on Sunday.

"We should go about re-civilising our country and return to live as we used to in former days," Ali Muhammad Gedi, the prime minister, told Al Jazeera.